Another Ideological Future Think of International Development

The expression, “Armies always re-fight the last war,” might also apply to development agencies.  Yesterday’s problems are engaged with outdated design.  Next development policy must have both present and future value.  What does that mean and what trends and policy emerge a decade from now?  

Trends

1.      Fewer poor countries. The old idea of a binary world of a few rich countries surrounded by lots of poor ones (G8 vs. G77) is no longer true.  This includes not just fast-growing India and China, but countries including many in Africa.  International loan programs for many poor countries will decrease in 10-15 years because current clients will be too rich to qualify.

2.      New donors break traditional aid cartels. The old donor-recipient model dominated by the 34 governments in the Organization for Economic Co-operation and Development (OECD) is passé. New donors (China, India, the Gulf, etc.) have different rules and different aid models linked to commerce.  Private philanthropists rival mid-size government donors in both size and influence.  The Gates Foundation distributes about $3 billion per year, which would make it on par with the aid programs of Italy or Australia.  Private sources of capital—hedge funds, sovereign wealth funds and other investment vehicles—are also sources of capital for poor regions.  Private capital investment to Africa was $55 billion last year, almost double the level of traditional aid.

3.      The end of the “doubling aid” era.  The “Gleneagles (Scotland) call for doubling aid” to Africa to $85/person by 2010 as part of the G8 Millennium Development Goals fell short, British and Australian pledges aside.  Prospects for major public sector aid dollars expansion are probably low.  Fiscal exigency across Europe and North America will likely hasten the relevance of private and non-OECD projects.

Policy

1.      More demand for value.  This is the early stage of results-based aid. Output-based aid is here while outcome-based aid (AKA Cash on Delivery) is being piloted.  Cash transfer accounting models are being applied because these are more efficient and as a reaction to old aid models that aren’t.

2.      Global public goods supplant country programs. With only a few dozen really poor countries left, and many poor people in middle-income countries, investment solutions will have impact beyond a single country.  This means more emphasis on vaccines, agricultural technology, clean energy, regional infrastructure and other factors that cannot be done by designing narrow country programs in Mali or Haiti.  Of course, political aid and bribes to allies for strategic reasons will stay in a country silo.

3.      Development shift toward non-aid tools. The UK debate about its aid program in India is a sign of the future.  The British public is asking why its scarce aid dollars might go to a country with $300 billion in reserves and a space program.  More to the point, India doesn’t want British aid.  It wants business, technology and visas.  This is increasingly true for Indonesia, Nigeria, Mongolia, Vietnam, etc., etc., etc.  For the OECD countries, development policy and tools have to be redesigned to encourage trade, investment, migration and other global interactions that are beyond the purview of aid agencies.

Conclusion

The new world isn’t here yet.  Western governments do not embrace these trends.  They are not set up to deal with change.  USAID and IDA were established years ago for a different world.  They show their age.  

Budget systems do not handle results-based aid models well.  Agencies maintain country-based allocations and strategies.  Credible/efficient ways to fund global public goods are illusive.  Even modestly articulating the concepts are more buzzwords than reality.  Finally, private sector tools are underutilized and even under threat (read the Overseas Private Investment Corporation—OPIC—in the USA).

This brief essay helps outline why the USA struggles with development reorganization and mistakenly embraces a flawed whole-of-government model.  Creating modern institutions with the capability to respond to new world demands may sound like moving chairs on the Titanic, but it will be required for competitive resources budgeted for global development.  Otherwise, function will continue to follow form while development agencies and their ideas fight the last war on poverty again rather than the upcoming one.